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Thursday, February 27, 2003

More on the China Technology Front

Lest anyone accuse me of being anti-Chinese (which , of course, I'm not) after my last post about intellectual property protection there, I hasten to add this piece from Fortune, making the opposite point, a company respecting IPP, but reinforcing the importantant point, China is going for the global technology market. If the day when China will be one of the major players (if not THE major player) seems far away just try thinking about networking economies and learning by doing advantages, topics Europe, in particular, seems to have forgotten about long ago.

A prominent item in last Saturday's New York Times resonated with me. The story said that Legend Group, one of China's largest tech companies and the leading PC vendor in Asia, now sets its sights on the world market-aiming for 30% of sales outside China by 2006, up from a tiny percentage now.

The news put me in mind of one of my most memorable business trips: five days in China with Intel Chairman Andy Grove back in 1998. The Intel boss was a hero in tech-mad China, not least because he had been Time magazine's 1997 man of the year. One of the primary reasons for Grove's visit was to attend the celebration of the production of Legend's one-millionth PC. I tagged along for the spectacle-loaded with both cheesy entertainment and passionate testimonials about the importance of technology to China's future. It left me with a deep respect for this company's commitment to winning.

The year before my visit, Legend had surpassed IBM to become the largest PC vendor in China. Today, almost five years later, Legend sells almost a million PCs every quarter. It dominates the Chinese PC landscape with a 27% market share. And China is the market to dominate these days. It is the world's fastest-growing large PC market, with sales rising 20% annually. That compares to an essentially flat market in the U.S. and Europe. This year China will surpass Japan to become the world's second largest PC market.

On the strength of its sales in China alone, Legend is the largest PC vendor in all of Asia, with 11.4%, says Gartner Dataquest. Expect that number to grow with the new focus on non-Chinese markets. Legend is already competing fiercely in Hong Kong. But the opportunities are great elsewhere in the region as well. The PC market grew 40% last year in Thailand, and 20% in Vietnam.

Legend isn't only a PC company. It also sells a million cellphones a year, and is making a major push into PDAs. It sells a PocketPC device, and plans shortly to start selling one based on the Palm OS as well. And services are the company's big new focus, just as they are for its giant overseas rivals like IBM and HP.

It remains to be seen, however, if the company has the managerial depth to match IBM and HP and become a major market force outside Asia. On my visit five years ago I was underwhelmed by the executives I met. Still, Legend is not to be dismissed as a global competitor. It has always positioned itself as a quality brand. Unlike Huawei, the Chinese network-equipment company that Cisco accuses of stealing its intellectual property, Legend has generally played by the rules since its founding by the Chinese government Academy of Sciences in 1984. It buys top-of-the-line chips from Intel (thus Grove's visit) and actually pays Microsoft for Windows, unlike many PC-makers in China.
Source: Fortune
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About

Edward 'the bonobo' is a Catalan economist of British extraction based in Barcelona. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

He is currently working on a book with the provisional working title "Population, the Ultimate Non-renewable Resource".

Apart from his participation in A Fistful of Euros, Edward also writes regularly for the demography blog Demography Matters. He also contributes to the Indian Economy blog . His personal weblog is Bonobo Land . Edward's website can be found at EdwardHugh.net.